What is the Difference Between Bookkeeping and Accounting

Difference Between Bookkeeping and Accounting

Bookkeeping and Accounting go hand in hand. However, on analysis, you will notice several differences between the two concepts.

Simply put, bookkeeping is a part of comprehensive accounting. It implies that the primary stage of maintaining the books of accounts is Bookkeeping. It concentrates on record keeping, regular entries of everyday transactions, etc. 

However, on the other hand, Accounting means analyzing and classifying information and transactions. It helps generate financial reports.

Therefore, Accounting forms the basis of decision-making to establish a business’s financial position. 

Often, people confuse the two concepts and use them interchangeably. To portray them in detail, I am here to explain the difference between bookkeeping and accounting.

Read the comparison to get the correct overview of the two. 

Importance of Bookkeeping

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Bookkeeping is recording the daily transactions of an enterprise systematically. Moreover, it classifies each transaction under appropriate financial heads and reflects the true position of the business.

Therefore, the role of a bookkeeper is very crucial. He must be competent to record everyday operations correctly. Accuracy is essential to prepare reliable books of accounts. This discipline is the basis of Accounting. 

Accounting is a critical part of the broader concept of Finance. However, fruitful accounting requires proper maintenance of books of accounts and relevant documents. Bookkeeping helps in this matter.

The primary aim of this method is to accurately record monetary transactions. As a result, the managers can make appropriate decisions because of the correct records.

Besides, it also shows the true position of the business on a single date or for a period. Therefore, accurate bookkeeping also helps investors to determine the financial status of a business. 

Different elements that a bookkeeper includes in this process are:-

  • Identifying the transactions and recording them in the Journal
  • Recording transactions under appropriate Day Books
  • Posting to Ledger and classifying under proper accounting heads
  • Preparation of Trial Balance
  • Preparing Cash and Bank Books

Details of Accounting

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Accounting is “the language of a business.” This implies that without this, one cannot understand the overall position of the business.

It is the method of systematic recording, processing, and communicating financial information.

If Bookkeeping is a set of data, Accounting will be converting that data into valid information. This is indeed the main point in the difference between bookkeeping and accounting. 

The stakeholders are always interested in the correct financial position of the business. However, without keeping the books properly, it is not possible to prepare statements.

Accounting information is easily obtainable from the records of daily transactions. Therefore, we can easily say that the two concepts are interconnected. 

Accountancy gives a true and fair view of business affairs as of a particular date. Hence, it helps different parties in the business to get a clear idea about the business operations.

The owners, stakeholders, customers, vendors, investors, etc., benefit from these well-maintained books and financial records.

The detailed overview and elaborate classification help in appropriate decision-making for both long and short terms.

The Government is also interested in getting the details of the Accounting results of the business. 

The elements of this discipline include:-

  • Profit and Loss Account or Statement of Income and Expenditure
  • Balance Sheet
  • Cash Flow Statement
  • Fund Flow Statement
  • Receipt and Payment Account, etc. 

Difference Between Bookkeeping and Accounting

Here are the primary points depicting the difference between Bookkeeping and Accounting.

These are the fundamentals for learning Commerce and Business.

Without the two, understanding a business’s financial status and creditworthiness is not possible. 


Bookkeeping means systematically identifying and recording daily transactions and classifying them under proper heads.

On the other hand, Accounting refers to summarising, analyzing, and interpreting transactions. This helps in the active communication of the business’s financial information. 

Financial Statements Preparation

Bookkeeping is not responsible for preparing the financial statements of the company. However, this is undoubtedly the work of Accounting.

The Final Account is a crucial part of this process, portraying the correct position of the business in front of the stakeholders. 


A bookkeeper will take care of the daily monetary activities. Therefore, there is no direct relation between decision-making and this process.

The managers can depend on Accounting information to prepare different reports. Moreover, Accounting statements validate the financial results of the business for a specific period. It helps a lot in proper decision-making. 

Determining Financial Position

Bookkeeping shows only the regular records of the transactions. It does not give a clear and complete picture of the financial position.

However, one can get a detailed view of the financial status of a company from the Accounting records and financial statements. Hence, it is more important to the investors, creditors, and customers. 

Analytic Views

Bookkeeping is a straightforward process and includes only data entry and posting into Ledger. Hence, the process does not require any in-depth analysis.

Conversely, Accounting involves analysis of every transaction, summarising them, interpreting the meaning, and finally communicating them to the related parties.

Therefore, it gives appropriate insights about the business to different internal and external parties. 

Qualification Required

A high level of qualification of learning is not necessary to do the job of a bookkeeper. Only basic knowledge about books of accounts is enough.

On the other hand, Accounting requires proper competent personnel to prepare the necessary financial statements.

Therefore, it needs high-level learning and in-depth knowledge to understand and analyze the different concepts involved. 

Tasks Involved

Bookkeeping organizes different financial data from various sources. It involves tasks like reconciling transactions (especially bank), billing, preparing invoices or recording them, and payroll.

Accounting is more involved in presenting and interpreting the data. It gives a comprehensive view of the financial data.

The aspects included here are auditing, preparing final accounts, analyzing the performance of the business, filing tax returns, calculating income tax consequences, budgeting, etc. 

Therefore, it is evident from the discussion that Bookkeeping is a part of the vivid world of Accounting. Both concepts are critical elements of Finance.

Therefore, a business cannot run appropriately without both these processes. An accountant can start the journey from Bookkeeper. However, a bookkeeper may not know all the concepts and methods of Accounting. 


Does bookkeeping help in Administration?

Bookkeeping does not have any direct connection with administration. It is only a part of it. However, the process is more administrative when compared to Accounting. It deals with the correct recording of all financial transactions. 

From where can I get information about the financial health of a business?

The financial health of a business is clear from the bookkeeping records. However, the overall picture becomes clear through Accounting. 

Does bookkeeping come before Accounting?

Yes. Bookkeeping is the first step after identifying a financial transaction. Accounting considers it to be the base for further generation of financial statements and other reports. 


The difference between Bookkeeping and Accounting is not a huge one. Accounting is only an extended part of Bookkeeping with some detailed features. The financial position of a business is of high importance to the stakeholders and investors. Hence, they show more interest in Accounting. 

Although bookkeeping is the base for Accounting, it implies only recording everyday financial transactions. However, it cannot help in decision-making or show the overall financial status of the business. The true and fair view is evident from accurate accounting statements. Therefore, anyone can become a bookkeeper, but preparing financial statements will require a skilled Accountant. 

The salary package for a bookkeeper is lower than that of an Accountant for obvious reasons. I hope by now the differences between the two concerts are clear to you. Therefore, do not change the terms interchangeably, as they are two aspects of finance. 

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